Month: February 2018

European Demand Jun15

Written in June 2015, when media enthusiasm over rising oil demand was hitting a crescendo, suggesting that demand would resolve the global oil supply imbalance. Although demand for price-elastic oil products, such as gasoline, continued to remain strong — especially in key markets of China, India and the US — a tepid macroeconomic environment had limited demand growth for other product grades. The media overreached when it suggested that European oil demand jumped 4% yoy in 1q15 on lower prices. In fact, bitterly-cold weather and changing bunker regulations drove the majority of Europe demand growth in 1q15, supporting crude runs. Normal weather patterns during the winter of 2015-16 led to negative yoy comparisons for Europe, pressuring distillate balances and pricing.  Download report here.

Jones Act & Panama Canal Feb15

Presentation at Crude-by-Water Conference in Houston on 04 February 2015. A discussion on whether the new set of Panama Canal locks opening in 2q16 could accommodate the movement of USG crude to USWC refiners facing production declines in Alaska North Slope crude (ANS) and domestic Californian heavy crude. The higher operating and capital costs of Jones Act Alaska fleet would make the required earnings and freight costs too high to overcome typical differentials between ANS and light USG marker grades.  Download presentation here.

Citgo Refinery Sales Oct14

Market commentary in October 2014 suggested that the sale of PDVSA’s three Citgo refineries would unleash significant volumes of Venezuelan crude from the Citgo crude slates for Chinese export, and thus boost VLCC demand by as much as 4%. This is unlikely. Actual Citgo Venezuelan imports are modest, but necessary for the plants. Instead, rising tight oil production and Canadian crude imports should send Latin American volumes eastward, but the shift in Saudi pricing posture after we published this report should change the extent. If successful in pricing US tight oil and Canadian oil sands out of the market, then PADD3 seaborne imports will not fall as much and the refiners’ crude wall would be less acute.  Download report here.